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quantiota
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Trading Volume Prediction

October 11th, 2022, 9:18 pm

Hey, what trading strategy to use if you know the mathematical equation between price and trading volume? Is there a tool that predicts trading volume?
PhD Physics, Quant researcher, Quantitative Modeling. Nonlinear time series transform. Searching for deeply hidden secrets in Time Series.
 
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Alan
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Re: Trading Volume Prediction

October 12th, 2022, 1:40 pm

Your questions suggest that there are deterministic relations between price and volume, which is certainly a bad starting assumption. Google for standard time series methods: ARMA, GARCH, etc.
 
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Alan
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Re: Trading Volume Prediction

October 12th, 2022, 2:49 pm

I will add that the "best" volume predictor will use a combination of backward and forward-looking information. Forward-looking information is found in options and scheduled events, like earnings release days for stocks. 
 
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quantiota
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Re: Trading Volume Prediction

October 12th, 2022, 3:53 pm

Now I have a direction for my research, thanks Alan.
PhD Physics, Quant researcher, Quantitative Modeling. Nonlinear time series transform. Searching for deeply hidden secrets in Time Series.
 
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Alan
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Re: Trading Volume Prediction

October 13th, 2022, 2:52 am

You're welcome. One final note is that, in finance, one almost always works with returns or so-called log-returns, not prices. 
 
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tags
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Re: Trading Volume Prediction

October 13th, 2022, 9:25 pm

@quantiota
what would be the purpose of that trading volume predictor?
 
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quantiota
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Re: Trading Volume Prediction

October 14th, 2022, 8:52 am

I am preparing myself in case I find this mathematical model, I am almost there after seven years of research. I need to understand how the volume prediction algorithm works in a production environment.
PhD Physics, Quant researcher, Quantitative Modeling. Nonlinear time series transform. Searching for deeply hidden secrets in Time Series.
 
cryptoarbitrageguy
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Joined: June 7th, 2022, 7:15 pm

Re: Trading Volume Prediction

April 19th, 2023, 5:34 pm

I haven't looked at volume as a prediction task, but I've used it before in these contexts:
- conditional for whether a relationship will hold or reverse
- a sign that a lot of people want to trade all of a sudden / I should dig deeper to see what that alpha is
- some alphas like rolling correlation between volatility and volume used to do well.
- had a few alphas that only worked when using volume bars which was neat.

That's about it though, wouldn't see prediction of volume as anything useful - maybe at an HFT timeframe since you are effectively predicting when a lot of people will be trading all of a sudden and that may add tons of jitter (for non-TradFi exchanges) / generally a sign to widen quotes.
 
cryptoarbitrageguy
Posts: 3
Joined: June 7th, 2022, 7:15 pm

Re: Trading Volume Prediction

April 19th, 2023, 5:34 pm

I haven't looked at volume as a prediction task, but I've used it before in these contexts:
- conditional for whether a relationship will hold or reverse
- a sign that a lot of people want to trade all of a sudden / I should dig deeper to see what that alpha is
- some alphas like rolling correlation between volatility and volume used to do well.
- had a few alphas that only worked when using volume bars which was neat.

That's about it though, wouldn't see prediction of volume as anything useful - maybe at an HFT timeframe since you are effectively predicting when a lot of people will be trading all of a sudden and that may add tons of jitter (for non-TradFi exchanges) / generally a sign to widen quotes.